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NETWORK HEALTHCARE HOLDINGS LIMITED
(REGISTRATION NUMBER 96/08242/06)
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
("NETCARE")
AUDITED GROUP RESULTS, PRO FORMA BALANCE SHEET(1) AND CAPITALISATION SHARE
ISSUE FOR THE THIRTEEN MONTHS(2) ENDED 30 SEPTEMBER 1997
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INCOME STATEMENT
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13 MONTHS YEAR FORECAST
ENDED ENDED YEAR ENDED
30 SEPT 31 AUGUST 31 AUGUST
1997(3) 1996(4) 1997(5)
(R000) (R000) (R000)
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TURNOVER 909 443 115 647 171 719
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OPERATING PROFIT 114 784 7 783 34 850
FINANCE CHARGES 54 736 12 645 (1 466)
DEBENTURE INTEREST 12 800 - -
OTHER INTEREST 41 936 12 645 (1 466)
PROFIT/(LOSS) BEFORE TAXATION 60 048 (4 862) 36 316
TAXATION (11 727) (757) (12 711)
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PROFIT/(LOSS) AFTER TAXATION 48 321 (5 619) 23 605
OUTSIDE SHAREHOLDERS' INTEREST (12 953) - -
PREFERENCE DIVIDENDS PAID BY
SUBSIDIARIES (2 063) - -
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EARNINGS/(LOSS) ATTRIBUTABLE
TO ORDINARY SHAREHOLDERS 33 305 (5 619) 23 605
ORDINARY DIVIDEND PAID (2 863) - (8 650)
RETAINED PROFIT/(LOSS)
FOR THE PERIOD 30 442 (5 619) 14 955
NOTES
(1) THE REFERENCE "PRO FORMA" IN THIS ANNOUNCEMENT ARISES FROM THE FACT THAT
THE CAPITAL RAISING PROCESS WHICH INCLUDED A RIGHTS ISSUE IN NETCARE, WAS
COMPLETED AFTER 30 SEPTEMBER 1997. TO ENABLE NETCARE SHAREHOLDERS TO GAIN A
PROPER APPRECIATION OF THE FINAL EFFECTS OF THE CAPITAL RAISING, THE
ACQUISITIONS REFERRED TO IN THE REVIEW AND COMMENTS AND THE SALE OF THE NETCARE
BUSINESS TO CLINICS, THE PRO FORMA BALANCE SHEET AT 30 SEPTEMBER 1997
ANTICIPATES THE COMPLETION OF ALL THOSE TRANSACTIONS. THE PRO FORMA ADJUSTMENTS
HAVE ALSO BEEN ACCOUNTED FOR IN THE CASH FLOW STATEMENT BUT HAVE NO EFFECT ON
THE INCOME STATEMENT FOR THE 13 MONTHS ENDED 30 SEPTEMBER 1997.
(2) THE INCOME STATEMENT HAS BEEN PREPARED FOR THE 13 MONTHS ENDED 30 SEPTEMBER
1997 TO CORRELATE WITH THE YEAR END OF THE LARGER AND MORE COMPLEX CLINICS
GROUP. NETCARE'S YEAR END HAS PREVIOUSLY BEEN 31 AUGUST.
(3) THE AMOUNTS REFLECTED IN COLUMN 1 OF THE INCOME STATEMENT INCLUDES THE
RESULTS OF NETCARE HOSPITALS FOR THE SIX MONTHS ENDED 28 FEBRUARY 1997 PRIOR TO
THE SALE TO CLINICS AND THE ATTRIBUTABLE INTEREST OF NETCARE IN CLINICS PROFITS
FOR THE SEVEN MONTHS ENDED 30 SEPTEMBER 1997.
(4) THE AMOUNTS REFLECTED IN COLUMN 2 OF THE INCOME STATEMENT ARE THE COMBINED
RESULTS OF THE BUSINESSES ACQUIRED BY NETCARE PRIOR TO AND SIMULTANEOUSLY WITH
THE LISTING OF NETCARE FOR THE YEAR ENDED
31 AUGUST 1996.
(5) THE AMOUNTS REFLECTED IN COLUMN 3 OF THE INCOME STATEMENT ARE THE PROJECTED
RESULTS OF NETCARE FOR THE YEAR ENDED 31 AUGUST 1997 AS FORECAST IN THE NETCARE
PROSPECTUS.
(6) SHAREHOLDERS AND INTERESTED PARTIES SEEKING A BROADER UNDERSTANDING OF THE
NETCARE/CLINICS GROUP ARE RESPECTFULLY REFERRED TO THE CLINICS ANNOUNCEMENT
ALSO APPEARING IN THIS PUBLICATION.
(7) THE OPERATING PROFIT IS STATED AFTER THE FOLLOWING (R000)
- DEPRECIATION 24 852 6 651 7 784
- CAPITAL EXPENDITURE FOR
THE PERIOD 49 680 17 602 18 000
(8) THE INTANGIBLE ASSETS ARISING FROM THE VARIOUS ACQUISITIONS, AMOUNTING TO
R24,71 MILLION AFTER ADJUSTING FOR THE OUTSIDE SHAREHOLDERS' INTERESTS, HAVE
BEEN WRITTEN OFF AGAINST RESERVES.
(9) THE OUTSIDE SHAREHOLDERS' INTERESTS REPRESENTS THE MINORITY INTERESTS IN
CLINICS INCLUSIVE OF GOODWILL.
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PRO FORMA BALANCE SHEET(1)
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30 SEPT 31 AUGUST
1997 1996
(R000) (R000)
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CAPITAL EMPLOYED
SHARE CAPITAL AND PREMIUM 505 042 12 185
NON DISTRIBUTABLE RESERVE 140 11 694
RETAINED PROFIT/(LOSS) 5 701 (34 864)
ORDINARY SHAREHOLDERS' FUNDS/(DEFICIT) 510 883 (10 985)
REDEEMABLE PREFERENCE SHARES 25 000 10 000
LONG-TERM LIABILITIES
- INTEREST BEARING 462 576 91 459
OUTSIDE SHAREHOLDERS' INTERESTS(9) 389 407 -
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1 387 866 90 474
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EMPLOYMENT OF CAPITAL
INTEREST IN JOINT VENTURES 1 733 -
FIXED ASSETS 1 350 299 87 692
- LAND AND BUILDINGS 1 137 017 48 521
- OTHER FIXED ASSETS AT BOOK VALUE 213 282 39 171
CURRENT ASSETS 525 850 35 789
- INVENTORIES 63 134 3 009
- DEBTORS 412 003 27 569
- BANK 50 713 5 211
CURRENT LIABILITIES 490 016 33 007
- CREDITORS 341 303 20 310
- TAXATION 38 796 887
- SHAREHOLDERS FOR DIVIDEND 59 -
- CURRENT PORTION OF LONG-TERM LIABILITIES 62 134 8 466
- BANK OVERDRAFT 47 724 3 344
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1 387 866 90 474
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PRO FORMA CASH FLOW STATEMENT
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13 MONTHS
ENDED
30 SEPT 1997
(R000)
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CASH GENERATED BY OPERATIONS 139 636
FINANCE CHARGES (54 736)
TAXATION PAID (895)
INCREASE IN NET WORKING CAPITAL (26 240)
CASH AVAILABLE FROM OPERATIONS 57 765
DIVIDENDS PAID (4 867)
CASH EFFECTS OF OPERATING ACTIVITIES 52 898
NET CASH EFFECTS OF INVESTING
AND FINANCING ACTIVITIES (52 898)
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SALIENT FEATURES
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13 MONTHS YEAR FORECAST
ENDED ENDED YEAR ENDED
30 SEPT 31 AUGUST 31 AUGUST
1997 1996 1997
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SHARE CAPITAL
ACTUAL NUMBER OF SHARES
IN ISSUE (000) 844 719 93 969 288 319
WEIGHTED AVERAGE NUMBER
OF SHARES IN ISSUE (000) 304 792 77 025 255 069
EARNINGS
EARNINGS/(LOSS) PER SHARE (CENTS) 10,9 (7,3) 9,3
INTERIM DIVIDEND (CENTS) 1,0 - 1,0
CAPITALISATION SHARE ISSUE IN LIEU
OF CASH DIVIDEND (CENTS) 2,0 - -
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CAPITALISATION SHARE ISSUE
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IN LIEU OF A CASH DIVIDEND, THE DIRECTORS HAVE RESOLVED TO ISSUE CAPITALISATION
SHARES TO ORDINARY SHAREHOLDERS REGISTERED IN THE BOOKS OF NETCARE ON FRIDAY,
23 JANUARY 1998.
DETAILS OF THE ENTITLEMENT RATIO OF NEW FULLY PAID ORDINARY SHARES FOR EVERY
100 ORDINARY SHARES HELD, WILL BE PUBLISHED ON TUESDAY, 20 JANUARY 1998.
THE NEW ORDINARY SHARES WILL BE ISSUED AS FULLY PAID UP BY WAY OF A
CAPITALISATION OF THE NETCARE SHARE PREMIUM ACCOUNT.
BY ORDER OF THE BOARD
L SOLOMON
SECRETARY
SANDTON
23 DECEMBER 1997
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REVIEW AND COMMENTS
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THE EXTRAORDINARY CHRONICLE OF NETCARE'S ACCOMPLISHMENTS DURING THE PAST
FINANCIAL YEAR COMMENCED WITH ITS LISTING ON THE JOHANNESBURG STOCK EXCHANGE ON
4 DECEMBER 1996.
DRIVEN BY AN INTUITIVE VISION AND COMBINED WITH THE INTEGRAL VERACITY CARDINAL
FOR INSTITUTIONAL SUPPORT, NETCARE WAS ABLE TO ENTER THE MARKET AS A COMPACT
HOSPITAL NETWORK SUBSTANTIALLY OWNED BY MEDICAL DOCTORS AND SPECIALISTS.
SHORTLY AFTER THE HIGHLY SUCCESSFUL LISTING, A BROADER ANALYSIS OF THE MARKET
CONFIRMED, THAT THOSE HEALTHCARE PROVIDERS WHO INTENDED TO MEET THE DEMANDS OF
TOMORROW'S CONSUMERS, WOULD HAVE TO DEVELOP THE CAPACITY, THE SKILLS, THE
PRODUCTS AND THE PROCESSES TO MEET THE CHANGING DYNAMICS OF THE INDUSTRY IN
GENERAL AND THE COMPELLING INFLUENCES DEVELOPING IN THE EMERGING HEALTHCARE
MARKET IN PARTICULAR.
ENCOURAGED BY THE SUPPORT OF SEVERAL LARGE INSTITUTIONS, THEMSELVES CONVINCED
OF SOUTH AFRICA'S NEED FOR A PROVIDER DRIVEN HEALTHCARE SYSTEM, NETCARE, IN
COLLABORATION AND WITH THE SUPPORT OF COSATU'S INVESTMENT ARM ("KOPANO KE
MATLA") AND THE MEMBERSHIP OF THE SOUTH AFRICAN MEDICAL AND DENTAL
PRACTITIONERS ("SAMDP"), SUCCESSFULLY NEGOTIATED THE ACQUISITION OF A
CONTROLLING INTEREST IN CLINIC HOLDINGS LIMITED ("CLINICS") FROM MR BARNEY
HURWITZ ET AL ("THE VENDORS"). IN ADDITION, NETCARE SIMULTANEOUSLY ACQUIRED
EIGHT HOSPITALS PRIVATELY OWNED BY MR HURWITZ ("CLINFED"), THE DURBAN ONCOLOGY
CENTRE ("ONCOLOGY") AND CONTROL OF LINKSFIELD PARK CLINIC ("LINKSFIELD").
IN ORDER TO CONSOLIDATE THE ENTIRE HOSPITAL NETWORK, NETCARE DISPOSED OF ITS
HOSPITALS TO CLINICS, INCLUDING CLINFED, ONCOLOGY AND LINKSFIELD. BOTH NETCARE
AND CLINICS RAISED FINANCE (DETAILS OF WHICH HAVE BEEN FULLY REPORTED) THROUGH
A COMBINATION OF SHARES AND CASH IN ORDER TO MEET THE COSTS OF THESE
ACQUISITIONS AND TRANSACTIONS.
HAVING REGARD TO THE DISPOSAL OF THE NETCARE HOSPITALS TO CLINICS WITH EFFECT
FROM 1 MARCH 1997, THE EARNINGS OF NETCARE ONLY INCLUDE THE PROFITS OF NETCARE
HOSPITALS FOR THE SIX MONTHS ENDED 28 FEBRUARY 1997. THE ADDITIONAL NETCARE
EARNINGS ARE THOSE ATTRIBUTABLE TO NETCARE THROUGH ITS EQUITY INTEREST IN
CLINICS. NETCARE IS DELIGHTED TO REPORT THAT THE EARNINGS PER SHARE FORECAST IN
THE NETCARE PROSPECTUS WAS COMFORTABLY ATTAINED, NOTWITHSTANDING THE CHANGE IN
THEIR SOURCE AND THE VARIATION IN THEIR NATURE.
THE NETCARE/CLINICS GROUP OF HOSPITALS NOW COMPRISES 35 HOSPITALS, CLINICS AND
SPECIALISED HEALTHCARE FACILITIES (INCLUDING ST ANNE'S HOSPITAL,
PIETERMARITZBURG ACQUIRED SUBSEQUENT TO THE YEAR END), CONTAINING MORE THAN 5
600 HOSPITAL BEDS OF WHICH NEARLY 12% ARE OF AN INTENSIVE CARE OR HIGH CARE
NATURE. THE NETCARE/CLINICS GROUP OF HOSPITALS ENJOY THE SUPPORT OF
APPROXIMATELY 7 000 DOCTORS AND WITH THE DELIBERATE OBJECTIVE OF INCREASING THE
PACE OF THE DEVELOPMENT OF PHYSICIAN HOSPITAL NETWORKS, THESE NUMBERS ARE
LIKELY TO INCREASE FURTHER.
NOTWITHSTANDING THE DELIGHT OF THE BOARD OF DIRECTORS WITH THE GROWTH OF THE
NETCARE/CLINICS GROUP, THEIR EXPANDED CAPACITY AND THE POTENTIAL OF THE NEW
GROUP UNDER NETCARE'S MANAGEMENT, SEVERAL MATTERS REMAIN TO BE SETTLED BETWEEN
NETCARE AND THE VENDORS OF CLINICS AND CLINFED. THESE MATTERS INCLUDE INTER
ALIA, THE APPLICATION OF THE "PRICE ADJUSTMENT FORMULA" TO THE DIFFERENCE
BETWEEN THE WARRANTED AND ACTUAL EARNINGS OF CLINICS AND CLINFED TO THE
EFFECTIVE DATES OF EACH ACQUISITION. THIS CLAIM IS PRESENTLY BEING
PROVISIONALLY COMPUTED, IN PREPARATION FOR SUBMISSION WITH OTHERS ON THE
WARRANTY CLAIM COMPUTATION DATE. NETCARE HOLDS CERTAIN SECURITY FOR THESE
WARRANTY CLAIMS.
HAVING SUCCESSFULLY ACQUIRED AND CONSOLIDATED THE NEW NETCARE/CLINICS GROUP OF
HOSPITALS, THE AVERAGE COST PER BED FULLY EQUIPPED, BASED ON THE VALUE OF THE
FIXED ASSETS AT 30 SEPTEMBER 1997 BUT EXCLUDING THE NON-CORE PROPERTIES AND
OTHER FIXED ASSETS WHICH ARE LIKELY TO BE MONETIZED, AMOUNTS TO R232 000 PER
BED. HAVING REGARD TO THE NATURE AND EXTENT OF THE HIGHLY SPECIALISED
FACILITIES IN THE GROUP AND THE PRESENT DAY AVERAGE COST PER BED FULLY EQUIPPED
OF APPROXIMATELY R400 000 PER BED, THIS IS REGARDED BY THE BOARD AS HIGHLY
SATISFACTORY AND RELIABLY SECURES THE FOUNDATION ON WHICH TO BUILD THE FUTURE
OF THE NETCARE GROUP.
BUT ALL OF THESE ARE YESTERDAY'S ACCOMPLISHMENTS. FOR THE FUTURE, THE GROUP IS
EXECUTING AND DEVELOPING ITS STRATEGIC PLANS TO MEET THE EMERGING NEW ORDER IN
HEALTHCARE. AS THIS CHANGE OCCURS, NETCARE ANTICIPATES MANY NEW OPPORTUNITIES
ARISING AND SEEKS TO PLAY A LEADING ROLE IN THE EMERGING MARKETS AND OTHERS
WITH INNOVATIVE HEALTHCARE MANAGEMENT AND MANAGED CARE RELATIONSHIPS WITH
PROVIDERS AND OTHER INSTITUTIONAL STAKEHOLDERS IN THE HEALTHCARE INDUSTRY.
AT A TIME WHEN THE SOUTH AFRICAN HEALTHCARE INDUSTRY IS SEARCHING FOR SOLUTIONS
FOR HEALTHCARE DELIVERY SYSTEMS, NETCARE IS SIGNIFICANTLY POSITIONED TO
INFLUENCE THE INDUSTRY IN A PROFOUNDLY POSITIVE WAY FOR THE BENEFIT OF THE
PROFESSION IN GENERAL, THE PATIENTS ENTRUSTED TO ITS CARE AND ITS RESPECTED
BODY OF SHAREHOLDERS.
IN THE ABSENCE OF ANY MATERIAL DECLINE IN THE SOUTH AFRICAN ECONOMY, NETCARE
EXPECTS GROUP EARNINGS TO MEANINGFULLY IMPROVE FOR THE YEAR ENDING 30 SEPTEMBER
1998.
ON BEHALF OF THE BOARD
M I SACKS (CHAIRMAN)
J SHEVEL (CHIEF EXECUTIVE OFFICER)
23 DECEMBER 1997 SANDTON
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REGISTERED OFFICE
THIRD FLOOR, SANLAM PARK SOUTH, 9 FREDMAN DRIVE, CNR BUTE LANE, SANDOWN,
SANDTON, 2196
(PRIVATE BAG X34, BENMORE, 2010)
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TRANSFER SECRETARIES
OPTIMUM REGISTRARS (PTY) LIMITED
FOURTH FLOOR, EDURA HOUSE, 41 FOX STREET, JOHANNESBURG, 2001
(P O BOX 62391, MARSHALLTOWN, 2107)
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EXECUTIVE DIRECTORS
M I SACKS CA (SA) AICPA (ISR) (CHAIRMAN), J SHEVEL MB B. CH. (WITS) (CHIEF
EXECUTIVE OFFICER), R H FRIEDLAND BVSC. (PRET) MB B.CH (WITS), DIP. FIN. MAN.
NON-EXECUTIVE DIRECTORS
D AVNIT B ACC CA (SA) MBA (WITS), A M CRADDOCK CA (SA), B DEDRYVER ESSEC, MBA,
R J HARPUR, H R LEVIN B COM LLB LLM H. DIP. TAX H. DIP. CO LAW (WITS), T
MOTSISI BA LAW (LESOTHO) LLM (SYDNEY) MBA (CANBERRA), G M RAMOKGOPA MB BCH
(MEDUNSA), R ROBERTS BA. J.D. (GEORGETOWN).
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